- UnitedHealth and Vista Equity Partners are close to buying the Advisory Board Company and split up the consultancy's health and education services, sources familiar to the matter told Bloomberg. The deal is still speculative and an announcement could be as far out as a month away, Bloomberg reported.
- UnitedHealth, who has a burgeoning consulting, technology business line under Optum, would gain Advisory Board's health division, according to Bloomberg's sources.
- Advisory Board's stock rose to close at $54.68 per share, up from $52.25 per share at the close of business Thursday, it's highest since July 31, 2015 ($59.90 per share). The company's share opened at $55.65 on Friday.
The report follows the February announcement from Advisory Board Company that it was considering the sale of some of or all of its business.
The February announcement followed a newsworthy month for the company. In January, Advisory Board announced it would let go of more than 200 individuals, about 6% of its healthcare staff. In addition, activist investor Elliott Management acquired an 8.3% stake in Advisory Board in the same month. The investor, known for integrating itself into board rooms and which recently disclosed a 9.2% stake in athenahealth, was quoted as wanting to look for "opportunities to maximize shareholder value."
In March, Advisory Board and Elliott Management agreed to a six month standstill period where the investor will not try to gain board seats from the company.
"Our company's exploration of strategic alternatives announced in February is ongoing, but we do not comment on market rumors or speculation," Robert Borchert, VP, Investor Relations at Advisory Board, told Healthcare Dive via email regarding the Bloomberg report. "As we announced in February, The Advisory Board Company does not expect to make further comment unless and until a specific transaction or alternative is approved or our company’s board of directors otherwise concludes its review of strategic alternatives."
The pairing of Advisory Board's healthcare division and UnitedHealth's Optum could be a good fit. Advisory Board has seen declining revenues recently in its healthcare divisions and UnitedHealth is looking to grow Optum's services.
In an earnings call in May, Advisory Board executives noted healthcare revenue was down 6.6% in Q1 2017, excluding exited programs, in comparison to the previous year. The decline was attributed to slower technology sales at the end of 2016.
However, renewal rate is very high for healthcare members, with U.S. hospitals renewing at 96%, consistent with the previous year, according to CEO Robert Musslewhite. In the Q1 earnings call, Musslewhite stated healthcare members are up 1% and that the company serves about 3,000 U.S. hospitals, 400 international hospitals and 1,100 nonprovider healthcare organizations. As of March 31, the company had a total of 4,482 healthcare members, up from 4,467 in 2016 and 4,242 in 2015.
With 5,564 registered hospitals in the U.S., Advisory Board has about 54% of U.S. hospitals (excluding international and nonprovider healthcare organizations) as members who remain clearly engaged.
Optum CEO Larry Renfro in an April earnings call for Q1 2017 stated Optum's "revenues are on pace to triple from 2011, and we are continuing efforts to align and integrate our businesses to position leadership, to build deeper relationships, and to focus on mission, culture and growth." A company like Advisory Board could fit in well with these objectives.
Disclosure: The author of this post previously worked at Advisory Board Company.